What it is
ROIC compares the after-tax operating profit a business produces to the total capital it took to run that business — both shareholder equity and interest-bearing debt.
Why it matters
ROIC answers a sharper question than ROE: "If the company found one more dollar from anywhere, how much profit could it earn deploying it?"
Companies sustainably earning ROIC above their cost of capital are creating value; those earning less are destroying it. This is the framing behind a lot of capital-allocation discussion.